Empresa de Energia de Bogota, Guatemala, Banco Davivienda, Hana Bank mull note issuance

By Christine Van Dusen

Atlanta, Aug. 18 - The buying spree of the previous few days subsided on Thursday for emerging markets debt as investors took a breather and just a few issuers - including Colombia's Empresa de Energia de Bogota SA ESP, the Republic of Guatemala, Colombia's Banco Davivienda SA and South Korea's Hana Bank - considered issuing new notes.

"EM bond investors are content to sit back and enjoy the summer," a trader said. "Client selling has been limited to the absolute high-betas, while some sectors - like the long end of Ukraine and South Africa - are unchanged, simply lagging the U.S. Treasury squeeze."

Even some of the names that are traditionally volatile, like City of Kiev and Russia's VTB Bank, barely moved, he said.

"It seems that the huge buying of the last few days has left dealers short and in no need to hit Street bids," he said.

The Markit iTraxx SovX spread started the day about 5 basis points off Wednesday's tights, while the JPMorgan Emerging Markets Bond Index spread widened 5 bps to Treasuries plus 333 bps.

"There also remains a flow out of high-beta into low-beta," a trader said. "It was a very active day, flow-wise, and overall balanced flow. There's nowhere near the panic in the market that we saw last week."

Said another trader, "There's still not much actual selling. Prices are simply marked lower, consistent with the odd trades that do go through."

Colombian issuers eyed

In deal-related news, Colombia-based fuel company Empresa de Energia de Bogota is planning a dollar-denominated offering of bonds, a market source said.

Deutsche Bank and Santander are the bookrunners.

The proceeds may be used to fund the call on the company's $610 million 8¾% notes on Oct. 31.

Also from Colombia, Bogota-based banking company Banco Davivienda is mulling an issue of up to $350 million of notes, a market source said.

No other details were immediately available on Thursday.

Guatemala, Hana Bank emerge

In another possible deal, Guatemala is considering an offering of notes that could total as much as $500 million, a market source said.

Proceeds from the Rule 144A and Regulation S deal could be used to refinance the sovereign's $325 million 10¼% notes due in November.

And South Korea-based lender Hana Bank is considering a $500 million offering of notes, a market source said.

Barclays Capital, Bank of America Merrill Lynch, Citigroup and HSBC have been linked to the transaction.

Middle East in focus

In trading, Abu Dhabi's First Gulf Bank PJSC saw its 2016 notes open on Thursday at 101.37 bid, 101.62 offered after pricing on July 26 at par.

Emirates airline was trading early in the session at 99.12 bid, 99.62 offered.

Abu Dhabi's 2019 notes lagged a bit at first and then started to stage a comeback, a trader said.

"Qatar's 2040s are making new highs at 1221/2," the London trader said. "But as we saw last week - and by the fact that on spread we are typically 100 bps wider on the year - it's not all one way."

Said another trader: "On the one had, on spread basis there is a good deal of value out there and we have obviously widened, for the most part, a lot over the month. So the blue chip names - which really should be trading on a spread basis rather than a cash basis - were very well supported this morning and pushed tighter on the day at one point.

"On the other hand," he said, "some feel like lightening up and trading short as the global backdrop is so poor."

Lebanon quiet

Sukuks, in general, were "quiet-ish," a trader said, "but overall the better-rated names feel OK."

He pointed to Sharjah Islamic Bank, which was almost 50 bps wider on the week but had a high cash price.

"Lebanon has been very quiet this week," he said. "I think a lot of people are out on the summer holidays."

Russia's Vimpelcom was an underperformer. And many bonds from Africa started the day well but faded as the session went on.

"All the star performing cash bonds are holding yesterday's gains," he said.

BTA trades up

The story continued for Kazakhstan's BTA Bank, with JSC Halyk Bank looking for a rule change that would allow the company to buy BTA's bonds.

"The BTA 2018s traded as high as 78½ before Halyk had a chance to deny this story," he said. "It has to be a serious consideration though, given the cash rich nature of local banks, coupled with the current lack of alternative assets to buy. Perhaps we are closer to at last having the local bid in Kazakhstan that so benefits other EM sectors."

From Turkey, sovereign bonds opened softer, down almost a point from the previous day's levels.

"With external market volatility high, attention was pretty much exclusively on the sovereign curve, which went out well bid," a trader said.

Better buyers for Garanti

On the corporate side in Turkey, Garanti Bankasi's 2017s and 2021s saw good retail demand. "But nothing's printed on the Street yet," a trader said. "We're seeing better demand for Akbank's 2018s today, which moved back in line with the curve. We are better buyers of Garanti's 2021s and sellers of Yasar Insaat's 2015s."

Much of Ukraine remained strong, he said. "It's a haven of tranquility, with prices just lagging U.S. Treasuries," he said.

Looking ahead, market-watchers expect to see a continuing fight between fans and foes of EM debt, the London trader said.

"I think the next year will be characterized by a big battle between those who see EM as a genuine alternative in a world where U.S. and Europe endure increasing growth problems and those who become concerned that EM still doesn't have enough critical mass to survive a big slowdown in the so-called 'developed' world," he said. "For now the first argument seems to be winning."

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